Manere v. Collins

Facts

In 2009, P and D, both graduates of the same high school, reconnected during their thirtieth high school reunion. Between the time after graduation and the reunion, both had pursued professions in the food service and bar industry. P had experience in the restaurant business and D was the owner and manager of a successful bar in New York City. P became aware that a popular bar and restaurant establishment, Seagrape Cafe (cafe), was for sale. P and D formed BAHR, a Connecticut limited liability company, for the purposes of purchasing and operating the cafe. P and D executed an operating agreement drafted by an attorney who previously had represented P in unrelated business matters. P and D were the sole members of BAHR. The operating agreement designated both its managers. D provided a $600 capital contribution and a $149,400 priority member loan. P provided a $400 capital contribution and a $19,600 priority member loan. D received a 60 percent interest and D a 40 percent interest in BAHR. P signed a lease on behalf of BAHR for the property on which the cafe is located and further provided a personal guarantee of BAHR's performance under the lease. P signed a lease on behalf of BAHR for the property on which the cafe is located and further provided a personal guarantee of BAHR's performance under the lease. P and D agreed that P would be primarily responsible for operating the cafe and acting as its on-site manager. As compensation for acting as the cafe's manager, P would be paid a weekly salary of $600. Shortly after the cafe opened, the plaintiff and Collins agreed to raise P's weekly salary to $1000 per week. P was responsible for hiring and paying staff, obtaining stock items such as food and liquor, and accounting for revenue and expenses. Unbeknownst to D, P was also using BAHR funds to pay for personal expenses such as health insurance, car payments, and gas. Hurricane Sandy severely damaged the cafe premises. The cafe was closed for a period of time in an effort to rebuild the premises. Both P and D agreed that neither would take any guaranteed payments from BAHR for a period of fifty-two weeks. P continued to take cash from the business during the recovery period. P even unilaterally increased that salary to $1500 per week in June 2013. P continued to use BAHR funds to pay for his health insurance, car payments, and gas. After the fifty-two-week period had ended, P ceased taking his $1500 salary in cash and resumed issuing himself checks in that amount. He also continued to use BAHR funds to pay for personal expenses. In 2015, D moved to Connecticut. D began to receive a weekly salary of $1000. P reduced his weekly salary from $1500 to $1000. Later that same year, P, D, and two associates of D opened a restaurant called the Georgetown Saloon. BAHR was not involved in this new venture. A separate limited liability company was formed for the purposes of owning and operating the Georgetown Saloon. P was tasked with operating the Georgetown Saloon and acting as its on-site manager. Georgetown Saloon proved unsuccessful and closed in July 2016. D became concerned with P's style of management based on the manner in which P conducted himself as its manager. D began seeking financial information. D began to ask cafe employees to text or e-mail him daily revenue numbers. D wanted to see the books and was met with an incomplete and lacking response. D obtained records of cash receipts and payments, bank records, tax returns, and other information in an attempt to reconstruct BAHR's financial history. D initially did not have access to the payroll system and, due to P's disorganized storage or outright destruction of BAHR's financial records, had only part of BAHR's financial records. The trial court found that D's reconstruction of the cafe's financial history revealed that P had misappropriated approximately $190,000 of BAHR funds. D unilaterally amended the operating agreement. P was terminated as a manager of BAHR. P was removed as the liquor permittee for the cafe. P's son, who was employed as a bartender at the cafe, was also terminated as an employee. D stopped payment on nine $1000 checks issued to the plaintiff and changed the locks on the cafe to prevent P from accessing the building. D brought the building into compliance with fire safety standards. He further ensured that the cafe's staff were put on a payroll system for the purpose of placing the cafe in compliance with state and federal wage and hour laws. The cafe's revenue increased by 25 percent. Since 2017, BAHR has not made any distributions to D or P. P has not been provided with any information concerning BAHR's finances pursuant to the operating agreement. Although D continued to receive a weekly salary of $1000 as of the time of the trial, no other payments have been made by BAHR to either party. P instituted the underlying action against D and BAHR, claiming a breach of contract, breach of fiduciary duty, and oppression. P requested the dissolution of BAHR pursuant to § 34-267 (a) (5) on the ground of oppression. D counterclaimed against P. The trial judge rendered judgment in favor Ds on all counts of the plaintiff's complaint. The court rendered judgment in favor of BAHR on its counterclaim and awarded it $190,463.03 in damages. P appealed.

Issues

Rule of Law

Holding and Decision

Legal Analysis

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